BoJ's Tamura: Japan's neutral rate is about 2%
Oleh Lallalit Srijandorn
Dikemas kini: 25 Jun 2026
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Bank of Japan (BoJ) board member Naoki Tamura said on Thursday that Japan's neutral rate is about 2% and it is important to push the policy rate closer to the neutral level to avoid being forced into sharp rate hikes later.
Bank of Japan (BoJ) board member Naoki Tamura said on Thursday that Japan's neutral rate is about 2% and it is important to push the policy rate closer to the neutral level to avoid being forced into sharp rate hikes later.
Key quotes
Japan's neutral rate is about 2%.
I envision rate hikes every few months toward about 2% neutral level.
If chances of upside price risks rise, BOJ should not hesitate to speed up rate hikes or increase rates by bigger margin.
Underlying inflation has already hit 2%.
Prices face upside risks despite Middle East developments.
Central bank faces different situation from Fed, ECB as policy rate remains below neutral, inflation expectations not firmly anchored.
I voted against pause on taper from next fiscal year, says central bank should normalize bond holdings swiftly.
Recent increase in long-term rates aligns with fundamentals, reflects market participants' views on inflation, monetary and fiscal prospects.
In the long term, BOJ must assess suitable balance sheet size from liability side.
Premature to start specific talks now, but future debate on suitable reserve level needed.
Inflation expectations have approximately hit 2%, continuing to rise further.
Concern mounting that firms will transfer costs faster and with larger margins than in 2022.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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